Tuesday, December 2, 2008

Employees are our biggest Strength ?

IT companies are the major recruiters from Indian Engineering colleges and are one of the most attractive career destination for the students in engineering colleges. Some of the major IT services companies recruits thousands of people every quarter and are well respected in all the campuses. 

If we actually see the reality of the matter these companies are simply sucking life out of their employees, these companies are hiding their inefficiencies by hugely underpaying their employees. As a matter of fact the starting salary of a fresh graduate is nearly 12000 to 15000 in most of the Services companies, after 1-3 months of training most of people gets billable and work for nearly 8.5 hours a day which has now been increased to 9.5 hours a day in many companies. The billing rate for a fresh engineer is nearly 20$/hour here in India compared to 80-100$/hour in US which is one of the most important factor which brings work to India is this cost arbitrage. For 20 working days a month, the companies are making a pretax income of nearly 3800 $/month/Employee and paying just 240-300 $/month/Employee. In this business the companies are having a contribution margin of nearly 93% which is huge comparing to the other businesses. For working 9.5 hours on job a person has to stay for nearly 11 hours a day in office. If we include the traveling time too, nearly half day is gone in doing office duties itself the employees does not have any motivation left for other recreation activities.

The second point of distress is the quality of work which is being given to Indian software engineers , nearly 80% of the work in all top services firm is either application maintenance , Testing or doing minor changes in the old code which can be done even by a 12th class student . Infact in USA most of the work of this kind is being done by far less skilled people. Due to this skill mismatch the Engineer dont use their knowledge and the whole creativity and education gets wasted. The effects of the whole process are clearly evident as even after so many years India has not developed any great software product , the entrepreneur here lack the risk appetite to invest in research , they are simply too happy in earning through revenue contracts with assured returns by underpaying their employees. 

The third issue which is often ignored is the lack of efficiency and the abundance of middle managers in Indian IT companies. In any company it’s the engineers who are doing the real work of developing of maintaining the code but we have huge number of managers who don’t add any tangible value to the company. 

One issue which has been highlighted off late is the affect of large bench size on the efficiency of the company .Nearly 25-35% of Indian engineers are always sitting on bench due to improper demand supply estimation which impacts the earning of rest 70% of the people who are working 9.5 hours a day. This inefficiency, which is very high in India compared to western companies. It is not a healthy sign for the Indian software industry as working engineers have to compensate for it in the form of low wages. The coordination between Marketing and HR teams is under a big question mark here as they are not able to forecast the requirement of the human resource and the flow of services projects.

Nowadays the IT companies are not giving joining dates to the fresh graduates and causing lot of problems to them. Many of the new engineers have been assured of joining only in 2010. This kind of treatment when a company has once assured the person of a job and is not making good the contract is a very biased tool which makes life of a common man tough . In most of the engineering colleges students are not allowed to apply for other companies once one gets placed in a company. The student’s suffering starts after the end of the course when he has to just keep waiting for the joining letter from the HR offices.

So are the IT companies really caring for their employees ?


Rishabh Makrand said...

nice calculative read.

Dandy said...
This comment has been removed by the author.
Dandy said...

Good points...just to add that although there is no doubt that the Indian IT industry is satisfied in servicing at the lower end of the value chain; the procrastination of calling the hired engineers is in the wake of a much grave problem, which is the impending depression.

I believe we can use this opportunity of crisis to invest in the higher end with the huge cash that these companies have, so that when the world economy improves, the Indian IT industry would be in great stead. As they say, its only from the ashes that a Phoenix rises...so invest in hard times for a Great tomorrow!

Ankit said...

Thanks @ Rishab

Thanks @ Deon , I agree with you but the problem is that now these companies are conserving cash . They dont have guts to invest in technology and research . Only time will tell if these company will be able to survive next 10 year with this mindset .

Anonymous said...

Hi Ankit,

May be would you agree with this post

I don't really get this. How are these IT companies going to charge their clients more money just because their employees are working longer hours. When I left my last company for joining MBA course, there was no new project for past 2 months and increasing work hours would have made no sense (except increasing electricity costs!!).

Ankit said...

@ Half Rebel

I think you didn't understood my views

1. I never asked Indian companies to increase their billing rates , I am just asking them to share their profits which are swelling every month . A company is not only responsible to the share holders but also to the employees .

2. Indian companies should reduce the inefficiencies of huge bench strength and sizeable non billable management middle to improve the wages of rest of the employees .

3. The skill mapping should be done in better manner .

Anonymous said...

Agree to all your points in your reply. But wouldn't they be all valid during the normal times also.

Ankit said...

They do except the last point abt delayed joinings :-)